PhD Lunch Seminars Amsterdam

Marius Zoican (VU)

We examine the determinants of brokers’ choice of a market venue when trading a security listed on multiple platforms. We use a detailed dataset on the Nordic markets (Oct 2009 – Sep 2010), where we observe trading activity for 226 brokers across 8 venues. Controlling for stock and trader fixed effects, we find that brokers are more likely to use entrant markets such as Chi-X when volatility is low, their trading needs are smaller or the entrant market is relatively more liquid. The role of volatility decreases significantly after the incumbent market converges in speed to the entrant ones, consistent with the adverse selection rationale. Proprietary traders use the new venues to a much larger extent than brokers who act for clients and also trade less by market orders. Testing for speed preferences heterogeneity, we find that clients of proprietary traders switch most to the incumbent markets after a major speed investment, while the momentum of entrant markets is overall reduced